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Everybody in the Industry Knows the US Doesn't Have the Gold

By: John Rubino | Thursday, January 31, 2013

In this week's talk with National Numismatics' Tom Cloud, he explains why
Germany's gold repatriation is just the beginning, the US Mint's silver shortage
will continue, and the big money is right about precious metals.

DollarCollapse: Hi Tom. It's been an eventful few weeks in precious
metals, though you wouldn't know from the price action alone. Hit the high
points for us.

Tom Cloud: Germany's gold repatriation is obviously a game changer.
They got all their gold back from France right away. But the US government
put them off for 7 years, probably by offering them some kind of premium to
take their gold back slowly. More gold, Treasuries, no one knows what exactly
but clearly it was a big inducement. It's also clear that Germany won't be
the last country to bring its gold home. The Netherlands is next and then probably
Switzerland. It's become a game of musical chairs. No one wants to be caught
when the music stops. And make no mistake, it will stop. Everybody in the industry
knows the US doesn't have the gold and can't deliver it. They've leased it
all out.

It's important to understand that there are two big stashes of gold in the
US. Fort Knox supposedly holds the gold that belongs to us. And the New York
Fed holds gold that has been deposited by other countries for safe keeping.
That's where Germany's gold would be if the US hadn't leased it out.

DC: Then there's the US Mint running out of silver eagles.

TC: They sold out in the first three weeks of the year and had to stop
taking orders. They've since started back up but demand is immense [editor's
note: silver eagle sales are now running at roughly 5 times the December rate
- see US
Mint silver coin sales in January climb to a record ]. Premiums are
way up on silver eagles since a lot of customers are willing to pay up for
the most recognizable coin. Others are either waiting for the premiums to go
down or are buying maple leafs or silver buffalo or philharmonics, which have
lower premiums.

DC: I thought buffalos were US government coins. Why aren't they selling
out too?

TC: The gold buffalo is made by the US Mint but the silver buffalo
is not. It's made by a private mint, which we shouldn't name because we they
don't need people calling them and bothering them. They're doing great though.

DC: So who's doing the buying now?

TC: Right now the big money is moving and the little money is not.
The little guy is gonna wait till gold jumps over 1700 to start buying. We've
been in this channel between 1600 and 1700 for a long time, but we'll break
out pretty soon. Then you'll see everybody pile in.

DC: And what do your clients want to talk about?

TC: It seems almost funny for a gold guy to spend a third of his time
answering questions about interest rates. But big gold buyers have a lot of
bonds too. Everybody knows the top [in bonds] will be soon if we haven't already
seen it. Just like people get the gold stashes confused, people also get confused
on interest rates because they read about "no interest rate increases till
2014". But can you borrow money from the fed at zero percent? Not if you're
not a bank. Interest rates aren't stable in the real world and have actually
been edging up for a while. The rate on ten-year Treasuries is up from 1.6%
to 2% lately. Very soon everyone will discover that the Fed can't control this.

John Rubino edits DollarCollapse.com and has authored or co-authored five
books, including The Money Bubble: What To Do Before It Pops, Clean
Money: Picking Winners in the Green Tech Boom, The Collapse of the Dollar
and How to Profit From It, and How to Profit from the Coming Real Estate
Bust. After earning a Finance MBA from New York University, he spent the
1980s on Wall Street, as a currency trader, equity analyst and junk bond analyst.
During the 1990s he was a featured columnist with TheStreet.com and a frequent
contributor to Individual Investor, Online Investor, and Consumers Digest,
among many other publications. He now writes for CFA Magazine.